HHS Releases Report on Consolidation and Private Equity (PE) in Health Care Markets

Today, HHS released a report in response to the Consolidation in Health Care Markets Request for Information (RFI), highlighting the impacts of increasing consolidation in our nation's health care markets and recent influx of Private Equity (PE) and other private investors active in the space.

The cost of health care has been outpacing wage growth for patients for decades, putting strain on both public and private budgets and limiting access. One of the main factors contributing to unsustainable health care inflation has been growing consolidation in the health care sector and the lack of meaningful competition. In December 2023, the Federal Trade Commission (FTC), Department of Justice (DOJ), and Department of Health and Human Services (HHS) announced a tri-agency collaboration to promote competition in health care markets. As part of that effort, the tri-agency RFI was released in March 2024 to understand how certain health care market transactions executed by health systems, private insurers, private equity funds and other private investors may increase consolidation and compromise patients’ health, quality of care, and affordability, while also threatening workers’ safety, satisfaction, and wages, and creating taxpayer burden. This RFI sought to inform potential actions the agencies could take to build on recent steps taken by the FTC, DOJ, and HHS to improve health care competition.

Over 2,000 unique and relevant comments were submitted from across the country, including comments from patients, physicians, health systems, insurers, industry associations, labor unions, and academic researchers. All comments were qualitatively reviewed and categorized by subject matter, relevant source of law, and other pertinent variables. An interagency team reviewed both the tabulations and underlying comments, the results of which informed this report.

HHS' Consolidation in Health Care Markets RFI Response synthesizes findings and highlights certain key facts, lessons, and ideas gleaned from the comments. It is not intended to be a comprehensive summary of all topics, but instead focuses attention on evidence, trends, and policy ideas that deserve greater scrutiny and consideration. HHS, DOJ, and FTC will continue to use the comments to inform regulatory and policy actions.

Key Points:

• Responses to the RFI primarily addressed two major trends in the health care sector:
  • 1) Increasing consolidation of health care markets
  • 2) A recent influx of private equity and other private investors into health care services
• Key themes from the comments include:
  • Theme 1: Provider consolidation leads to higher prices and less access for patients
  • Theme 2: M&A in health care services, especially in PE-backed transactions, results in process changes and quality reductions
  • Theme 3: Physicians that worked with PE firms offer mixed reviews
  • Theme 4: There is widespread desire for transparency on PE-led transactions
  • Theme 5: People are dissatisfied with private health insurers, especially vertically integrated insurers
• Case studies highlight how PE firms loaded hospitals up with debt, sold the hospitals' underlying assets, and paid investors through dividends and financially engineered sales, resulting in negative consequences such as bankruptcy, closure of facilities and service lines, staffing shortages, and patient safety and quality concerns.
• Policy considerations include:
  • Enhancing ownership transparency, building on CMS' nursing home ownership transparency rule
  • Increasing disclosures of mergers & acquisitions in health care by lowering reporting thresholds, requiring review and approval, and empowering relevant authorities with data and resources needed to conduct review of health care transactions
  • Pursuing further enforcement actions to halt hospital mergers and industry rollups
  • Continuing to improve data sharing and other collaboration across agencies, Congress, and state and local authorities in an all-government approach to promoting competition

You can read the full HHS' Consolidation in Health Care Markets RFI Response Report here.